O'Neill v Medical Benefits Fund of Australia

Judgment (11 paragraphs)

[1]

Introduction 1 On 26 November 2001 a Federal Magistrate made orders determining an application by Mr Kevin O'Neill who sought damages under s 82 of the Trade Practices Act 1974 (Cth) ("the Act") and damages for breach of contract from his former employer, Medical Benefits Fund of Australia Limited ("MBF"). Both Mr O'Neill and MBF have appealed against the judgment. His Honour found that MBF had breached s 52 of the Act by making certain representations to Mr O'Neill before he took up employment with MBF. One order made on 26 November 2001 was a declaratory order: "I declare that the Respondent (MBF) has engaged in misleading and deceptive conduct in breach of s 52 of the Trade Practices Act 1974 by representing to the Applicant (O'Neill) that employment with the Respondent would be secure and/or for the long term." His Honour did not make an order for damages in favour of Mr O'Neill but ordered that MBF pay Mr O'Neill's costs. MBF has appealed from the whole of his Honour's judgment. Mr O'Neill has appealed from that part of his Honour's judgment in which he declined to make any order for damages.

[2]

Background 2 Mr O'Neill commenced employment with MBF on 10 June 1998. From 1988 he had been employed in a managerial position with a health insurance company, National Mutual Health Insurance Pty Ltd, ("National Mutual") which was a competitor to MBF. His employment with National Mutual was secure. He was persuaded to leave that employment and commence work with MBF after he was approached by an executive search company acting for MBF. He was made redundant by MBF in July 2000. 3 His Honour made the following findings about the circumstances of Mr O'Neill's recruitment by MBF: (i) Mr O'Neill took up employment with MBF because the position he ultimately accepted was in Melbourne where he lived. It involved a challenge given the restructuring that was then occurring in MBF. He had initially been offered employment with MBF in Brisbane.

"[COUNSEL FOR MBF]: The relevant part of the case that I wish to take your Honour to - the copy I have does not have paragraph numbers, it just has page numbers on the top right-hand corner. I will try and direct it as best I can, your Honour. The area that I want to go to is at page 28 of 32. It comes under the heading 8.1 Four-Year Term or Long-Term Employment. In the third paragraph under that heading begins: The representations made by WTPHK through Loundes as to its long-term commitment to Sheldrick were clearly representations as to a future matter, namely, the length of time for which Sheldrick would be employed by the partnership in Asia. Pursuant to section 51A of the act, such a representation is assumed to be misleading unless the party making the representations can show that it is made on reasonable grounds. It was common ground that Loundes had faced significant opposition to Sheldrick relocating but persevered to ensure that it happened. Then further in the bottom paragraph of that page, your Honour, and I realise that this is referring to section 51A and that is not pleaded in this case but in my submission it is still very relevant for the following reasons: The evidence also showed at the time of the representations it was envisaged that WTPHK would be engaged for a number of years on the Kliab project and even if Sheldrick was not to be involved for … (reads) … they were not misleading and deceptive in breach of the act because they were based on reasonable grounds when they were made." (Emphasis added.) 12 Counsel for Mr O'Neill responded to this submission in the following way: "[COUNSEL FOR O'NEILL]: My learned friend made a submission in relation to section 51A and referred to that section arising from its consideration in another decision. True it is it wasn't pleaded. It is my submission, your Honour, that section 51A is an evidentiary point and is a matter for the conduct of the case, and indeed the matters arising from section 51A are expressly referred to in paragraph 18 of the outline that was filed in these proceedings on the opening of the case. In relation to section 51A and it being a matter for evidentiary consideration, as opposed to a matter for pleading, I take your Honour to page 294 of the decision in Cummings v Lewis, wherein the majority of the court, and it was a provisional view, said: 'Our provisional view is that s 51A of the Trade Practices Act and its counterparts such as s 41 of the Fair Trading Act, are evidentiary provisions, not directed at what a party must plead. The rules of the Court in relation to pleading require the pleading to contain, and only contain, a statement in a summary form of the material facts on which a party relies; see O 11, r 2. The cause of action which is relied upon is a cause of action for breach of s 52 (or s 42). Sections such as s 51A are designed to facilitate proof. They affect the onus of proof but they are not part of the law which provides for the cause of action for which sections such as s 52 provide.' [HIS HONOUR]: You don't have to trouble me with that. I don't think your friend took that literally. In fact, the authority they referred to was just indicating how it might be applied. I didn't take him to be … ." 13 Sections 42 and 43 of the Federal Magistrates Court of Australia Act 1999 (Cth) ("Federal Magistrates Act") relevantly provide: "42. In proceedings before it, the Federal Magistrates Court must proceed without undue formality and must endeavour to ensure that the proceedings are not protracted. 43. (1) The practice and procedure of the Federal Magistrates Court is to be in accordance with Rules of Court made under this Act. However, this subsection is subject to any provision made by or under this or any other Act with respect to practice and procedure. (2) In so far as the provisions applicable in accordance with subsection (1) are insufficient: (a) … (b) the Rules of Court made under the Federal Court of Australia Act 1976 apply, with necessary modifications, so far as they are capable of application and subject to any directions of the Federal Magistrates Court or a Federal Magistrate, to the practice and procedure of the Federal Magistrates Court in relation to the jurisdiction of the Federal Magistrates Court under laws of the Commonwealth other than: (i) … (ii) … (iii) … (3) In this section: practice and procedure includes all matters in relation to which Rules of Court may be made under this Act." The Rules made under the Federal Magistrates Act contain provisions concerning the contents of applications and rule 4.02 provides: "4.02 An application must precisely and briefly state the orders sought and (if the application is for a general federal law proceeding) the basis on which the orders are sought." The Rules also empower the Federal Magistrates Court to make directions in relation to, inter alia, the defining of issues (see 10.01(3)(c) of the Rules) and the giving of particulars (see 10.01(3)(m)). 14 There is no express provision in the Rules of the Federal Magistrates Court for pleadings of the conventional type, namely statements of claim and defences. It is not clear whether, in the proceedings before the Federal Magistrate in this matter, the statement of claim and defence were filed as a result of directions given by the Federal Magistrate. 15 There is some diversity of view within the Federal Court about whether, and the way in which, a party seeking to derive the benefit of s 51A must inform the opposing parties that the section will be relied on. One view is the tentative view of Sheppard and Neaves JJ in Cummings v Lewis (1993) 41 FCR 559 at 567 to 568 in the passage quoted by counsel for Mr O'Neill set out at [12] above. The matter has been considered in several judgments since and the authorities are conveniently set out by Drummond J in Australian Competition & Consumer Commission v IMB Group Pty Ltd [1999] FCA 819. His Honour said: "In my opinion, even if it be the position that an applicant is not required by O 11 r 2 to plead reliance on s 51A, as was suggested in Cummings v Lewis, that does not free it of the obligation to indicate, by way of particulars given in accordance with O 12 r 1, its intention to rely on that provision. Notwithstanding what was said in Cummings v Lewis, a number of judges of this Court have been of the opinion that where a party wishes to rely upon s 51A, it must give a clear indication of that to its opponent. See Bond Corporation per French J, Phoenix Court v Melbourne Central Pty Ltd (unreported, 22 October 1997) per Goldberg J and Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (1998) ATPR 41-633 per Foster J. I agree with this approach. The next question is whether the Commission in pars 20 and 35 of its consolidated pleading sufficiently alerted the respondents of its intention to rely upon this section. While I agree with French J, in the Bond Corporation case, that a party who invokes s 51A should make it clear to the other party that it is doing so, I respectfully disagree that the duty of the applicant to make clear that it invokes s 51A is discharged "if it pleads that the respondent did not have reasonable grounds for making the representation and that it was thereby misleading or deceptive". In my opinion, while an experienced lawyer might read more into it, that in terms does nothing more than invoke sub-section (1) of the section, which is declaratory of the common law and which, if alone relied on, leaves the burden of proof of the absence of reasonable grounds on the applicant who alleges it. See Ting v Blanche at 552 and Phipson on Evidence, 14th ed, par 4-05, particularly at note 28. It is true, as Goldberg J observed in Phoenix Court, that, by force of O 11 r 5, a party need not plead a fact if the burden of disproving the fact lies on the other party. But, as a matter of construction, s 51A cannot, in my opinion, be read as establishing that the only way of showing a predictive representation is not misleading is for the representor to prove that it had reasonable grounds for the prediction: a representee can, if it chooses, accept the full burden of proving the absence of reasonable grounds for such a representation. It will, in my opinion, do that if it pleads no more than that representation as to a future matter was made without reasonable grounds and was therefore misleading. It is s 51A(2) which must be invoked if an applicant wishes to reverse the burden of proof. However, I agree with French J that this can be sufficiently done by an express reference to reliance upon s 51A. As his Honour observes, this approach is probably logically more consistent with the structure of the section." 16 We are prepared to accept that in a case such as the present MBF was entitled to know, as a matter of procedural fairness, that s 51A was relied on either expressly or by clear implication. It is unnecessary to address the question of whether it needed to be pleaded in this case particularly having regard to the comparative informality created by the legislative scheme governing the Federal Magistrates Court including its Rules. 17 The statement of claim does not, in terms, refer to s 51A nor does it clearly raise by implication that the section would be relied upon. However it is tolerably clear that pars 9(a) and (b) and the latter part of (c) concern, either in part or in whole, representations as to future matters. What the pleading does not contain is any allegation that MBF did not have reasonable grounds for making the representations. However that allegation was made in par 18 of the contentions of fact and law handed up by counsel for Mr O'Neill at the commencement of the hearing. Not only were the relevant elements of s 51A(1) identified (having regard to the case Mr O'Neill sought to put) but reference was made to Cummings v Lewis. It was accepted by counsel for Mr O'Neill in the appeal that the page in which Sheppard and Neaves JJ expressed their provisional conclusion was misdescribed. It was not page 295 of the Australian Law Reports but rather 294. However, in our view, when the contentions were provided a point was reached in the proceedings where counsel for Mr O'Neill was comparatively clearly raising the elements in s 51A which would bring into play s 51A(2). Moreover the reference to Cummings v Lewis ought reasonably have been taken by counsel for MBF as indicating that Mr O'Neill intended to gain the advantage of s 51A notwithstanding that the section had not been referred to in the statement of claim. 18 Counsel for MBF in this appeal did not suggest that counsel for his client at the hearing then raised any objection. Rather he drew attention to the exchange in the transcript set out at [11] above where counsel for MBF noted that s 51A had not been pleaded. However counsel for Mr O'Neill made plain in the extract of the transcript of the proceedings before the Federal Magistrate set out in [12] above, that s 51A was relied on and it was unnecessary to have pleaded it. Again, counsel for MBF in this appeal did not suggest that this latter submission led to a complaint from counsel then appearing for MBF that it had been taken by surprise or would have run its case differently had it been aware that s 51A would be relied on. Indeed, as pointed out in this appeal, the approach adopted by MBF before the Federal Magistrate was to deny that the allegations had been made at all. That was the evidentiary case it ran. In our opinion, Mr O'Neill relied on s 51A and MBF was not denied the opportunity to conduct its case on the footing that Mr O'Neill did so. 19 This leads to a consideration of whether the Federal Magistrate reached the conclusions he did in par 142 to 145 set out at [7] above because MBF failed to establish it had reasonable grounds for making the representation. An anterior question is perhaps whether it matters. In par 144 the Federal Magistrate used the language of s 51A. That is, he said MBF did not have reasonable grounds for making the representation. However, that conclusion is expressed as an affirmative finding. It was something about which the Federal Magistrate was satisfied. It is not expressed to be a result emerging from the operation of s 51A. It must be doubted that the conclusion is founded on the operation of that section. 20 However, in our opinion, it ultimately does not matter if his Honour was or was not referring to s 51A. The Federal Magistrate made findings that the representations set out in [4] above were made. As noted earlier, these findings have not been challenged in this appeal. Both representations are, in substance, representations as to future matters. In those circumstances s 51A operates, in the absence of MBF establishing it had reasonable grounds for making the representations (which it did not do), independently of any consequential finding made by the Federal Magistrate with the result that the conduct of MBF is to be taken to be misleading. 21 MBF has not demonstrated in this appeal that the declaration by the Federal Magistrate should not have been made. In those circumstances it is unnecessary to deal with a further submission made by MBF that the Federal Magistrate erred in the approach he adopted in considering whether the representations as to future matters were misleading and deceptive apart from the effect of s 51A. However we presently doubt that the approach contended for by counsel for MBF correctly stated the applicable principles. 22 This leads us to the second issue in the MBF appeal. It is whether Mr O'Neill relied on the representations made. It is to be recalled that in par 145 of the Federal Magistrate's reasons (set out at [7] above) his Honour expressed his ultimate conclusion that Mr O'Neill had relied on the misleading and deceptive conduct. His Honour had earlier expressed a similar view in par 137 of his reasons when he said: "I am satisfied that the conduct of the respondent and/or its agents was such that there was a real possibility of misleading or deceiving the applicant in relation to the longevity of the employment. Had it not been for that misleading conduct I am satisfied and so find that the applicant would not have left his then secure employment." The submission of MBF on this point entailed a detailed analysis of various aspects of the evidence. However Mr O'Neill gave the following evidence in chief: "[COUNSEL FOR O'NEILL:] Just before we go to that matter, I want to take you to the factors that caused you to make your decision to accept the employment with the respondent. Are you able to inform the court what matters you relied upon in deciding to leave your former employer HBA and join employment with the respondent? [O'NEILL]: Yes, it was a long-term secure position in a senior role with a major national health fund that was changing its way of doing business, and it was a challenge that I was happy to meet and I felt that I had experience that I could take with me to be involved in that change." and the following evidence in cross-examination: "[COUNSEL FOR MBF]: Mr O'Neill, I put to you that's totally inconsistent with your training, your experience and your background, that you know exactly that any contract negotiator - it is the finalised contract that is the central, critical contract between the parties. If there are any doubts about it it's what's in the contract. You understood that, didn't you? [O'NEILL]: Yes, but I had no doubt it, that it was a long-term position, I didn't query that because I don't believe I had cause to query it. I was satisfied in my mind that I had a long-term position offered to me; it would see me through to at least 65, my retirement age - not that I have any plans to retire - and I didn't query it." 23 It is clear the Federal Magistrate generally accepted the evidence of Mr O'Neill. These particular answers were direct and compelling evidence of reliance. Counsel for MBF pointed to the terms of the contract actually agreed to (that Mr O'Neill's employment could be terminated on one month's notice) and that the terms were agreed in circumstances where generally other employees had been offered contracts with three months' notice. Mr O'Neill actually signed his contract several months into his employment with MBF. However the fact that Mr O'Neill agreed to a contract providing for termination on one month's notice is not decisive. In Sheldrick v WT Partnership (Aust) Pty Limited (1998) 89 IR 206 the applicant's contract contained a provision that it was terminable on three months' notice. Despite that provision, Einfeld J made a finding (at 236) that representations had been made to Mr Sheldrick that the respondent in that case "had a long term commitment to him". We are not satisfied that the Federal Magistrate erred in finding that Mr O'Neill relied on the representations made. 24 For these reasons the appeal of MBF should be dismissed.

The appeal by Mr O'Neill 25 We noted earlier that while the Federal Magistrate made a declaration that MBF had engaged in misleading and deceptive conduct, he made no order for the payment of damages. His Honour's reasons for adopting this approach were: "149. The more difficult question in this case is the issue of damages if any which flow from the finding that I have made that the respondent has contravened s 52 of the Trade Practices Act. The task of the court in assessing damages has been made particularly difficult in the present case by the lack of evidence which would assist in making an assessment of damages. The applicant did not call any evidence from his former employer, did not produce any tax returns and/or records of past or current income and did not otherwise adduce evidence which may have assisted the court in determining the full extent and nature of loss if any arising from the misleading and deceptive conduct of the respondent. 150. I have read the exhibits and transcripts on a number of occasions in order to glean as best I can sufficient information upon which I could make a finding in relation to damages. Whilst there is evidence from the applicant that his current employment resulted in a daily rate of an amount less than his salary with the respondent, it is not clear whether in acting upon the representation the applicant's employment with the respondent resulted in an increase or decrease in salary which he had earlier earned. It is also not clear whether the salary currently received by the applicant, even if at a reduced level, is a direct consequence of the misleading and deceptive conduct. No attempt was made to undertake any comparative analysis between the income which the applicant would have earned had he continued in the secure employment which he enjoyed prior to being recruited by the respondent. 151. I accept the submissions of counsel for the respondent that in the present case it is difficult to establish the amount of salary the applicant had received with his former employer. I further accept that in any event after the expiration of 17 weeks where he received his full salary the applicant was successful in obtaining full time employment which appears to be suited to his qualifications. I should add that at no stage did the respondent suggest that the applicant was not a competent and capable employee and certainly to the extent that I was able to assess his competence in giving evidence I could not find any basis upon which it could be suggested that the applicant was not a competent and capable person. He has proved his competence by successfully managing to be re-employed and like other members of the workforce will no doubt face uncertainty from time to time in future employment. 152. The task of this court however in applying the relevant authorities to which I have been referred is to determine whether there is in truth and fact a loss which could be said to be consequential upon the misleading conduct. In trying to determine whether the applicant has suffered a loss of a sum which could be said to follow as a consequence of altering his position due to the misleading and deceptive conduct I have been unable to reach a conclusion which on the balance of probabilities would satisfy me that it is appropriate to award any damages. 153. I should add for the sake of completeness that in the assessment of damages it is not for the court to embark upon idle speculation or to indeed try to draw a conclusion from inadequate or deficient evidence. It would not be difficult in a case of this kind to establish a claim for damages by presenting appropriate documentary material which at least provided the court with evidence upon which it could rely by way of comparative analysis between income received by the applicant in employment prior to joining the respondent and consequential loss which may have flowed from the misleading and deceptive conduct. That evidence would also include both viva voce and documentary material possibly from experts as to the projected income of the applicant had he remained in his secure employment and not accepted the position with the respondent. Regrettably that evidence was not available to this court. 154. Applying the passage from Hill J in Argy & Blunts [sic] (1990) 94 ALR 719 to the present case, it is my view that I am unable to conclude that there was any loss and damage suffered arising from the misleading and deceptive conduct in this matter." (Emphasis added.) 26 Counsel for Mr O'Neill challenged these conclusions on two bases. The first is that the reference in paragraph 152 to "the balance of probabilities" indicates that his Honour misapplied accepted principles in deciding whether damage had been caused and in assessing damages. The second alleged error is apparent from several observations made by the Federal Magistrate that there was insufficient or inadequate evidence to make relevant findings. It was common ground in this appeal that if Mr O'Neill was successful, the appropriate order was to remit the matter to the Federal Magistrate to assess damages. 27 We turn to consider the first issue raised in this appeal. Section 82 of the Act creates a statutory cause of action requiring proof of conduct contravening s 52 and some consequential loss or damage: see Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525. That is not to say, however, that the cause of action may not be based on contravention of other provisions of the Act: see Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 509 and 528. Counsel for Mr O'Neill did not submit that it was unnecessary to prove on the civil standard the various elements of a statutory cause of action. However reliance was placed on the reasons for judgment of Mason CJ and Dawson, Toohey and Gaudron JJ in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332. Their Honours said at 355: "On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable." 28 However this passage is referring to a position which differs materially in relevant respects from the present. In that matter the issue was whether the loss of an opportunity to obtain a commercial advantage or benefit was a loss or damage for the purposes of s 82 and, if so, how damages were to be assessed. The commercial opportunity was never realized which created the difficulty in evaluating the worth of the lost opportunity as part of the assessment of damages. The reference of the Magistrate to "the balance of probabilities" appears to be directed to the question of whether any loss was suffered. That is, it is a reference to proof of an element in the cause of action. If that is what his Honour meant it is an unexceptionable statement. On that assumption it does not imply error. 29 Before considering the second issue we should refer to one matter which appeared to be common ground. There ultimately appeared to be no issue that the Federal Magistrate might assess damages in the following way. The misleading and deceptive conduct led Mr O'Neill to leave his secure employment and take other employment with MBF. He therefore left a job at a particular level of remuneration and took up other employment which came to an end a little over two years later. He was then employed in occasional temporary employment and then in more permanent employment. Any loss he suffered was the loss flowing from him relying on the misleading and deceptive conduct. One way that loss could be quantified would be to ascertain the difference (if any) between the salary he would have been earning in employment with National Mutual and the income he then received in the position with MBF and in the employment he entered or might enter after being made redundant by MBF. The damages would be the difference over the period it was likely Mr O'Neill would have stayed in employment with National Mutual. A similar approach has been followed in the assessment of damages where a person's employment has been unlawfully terminated: see Gregory v Philip Morris Ltd (1988) 80 ALR 455 at 482-484 and Bostik (Australia) Pty Ltd v Gorgevski (No 1) (1992) 36 FCR 20 at 32-33. Although caution must be exercised in drawing on methods of assessing damages in other causes of action: see Murphy v Overton Investments Pty Ltd (2001) 112 FCR 182. 30 We turn to consider the second point raised by counsel for Mr O'Neill. It appeared to be common ground that the issue of fact about which there may have been some uncertainty in the mind of the Federal Magistrate was Mr O'Neill's income in the job he had with National Mutual and left in June 1998 to take up employment with MBF. We should add that the submissions made on Mr O'Neill's behalf to the Federal Magistrate were, to the extent that we were taken to them, not clear. They did not identify clearly the basis upon which damages should be assessed as discussed in the preceding paragraph. However there was evidence before the Federal Magistrate which, in our opinion, was of sufficient probative worth to enable him to make a finding about the salary Mr O'Neill had been receiving before he took up employment with MBF. 31 He twice gave evidence that his salary was approximately $84,000 per annum (as a package) and he had last received a bonus of $1200. While counsel for MBF sought to challenge this evidence in cross-examination by putting to Mr O'Neill that his salary was around $70,000 per annum (as a package) it was not a matter that was pursued by counsel for MBF. No attempt was made by MBF to prove the contrary, save for some evidence that was led about conversations that had been had (between whom is unclear) with his former employer about his salary suggesting the salary had been $70,000. However the Federal Magistrate would have been entitled, in our opinion, to make a finding about what Mr O'Neill's salary had been, based on his evidence. It was not essential, as his Honour implies, for Mr O'Neill to prove his income by, for example, tendering tax returns or payslips, though it would have plainly been desirable for the issue to have been addressed in the evidence with greater precision. 32 Counsel for MBF placed particular reliance on a decision of the Appeal Division of the Supreme Court of Victoria, J.L.W. (Vic.) Pty Ltd v Tsiloglou [1994] 1 VR 237. That matter concerned proceedings claiming damages under s 82 of the Act brought by two lessees of a shop against the lessor and the managing agents. The shop had been broken into and stock was stolen. One issue in the appeal was whether it had been open to the trial judge to award damages for an amount smaller than the amount claimed ($118,050.00) being the value of the stock stolen in the burglary. Brooking J undertook an extensive review of relevant authorities at 241-246 concerning the extent to which it is incumbent on a plaintiff to call evidence precisely quantifying the loss suffered. However ultimately the difficulty the lessees encountered in that matter which led to the verdict in their favour being set aside, was that the trial judge rejected the evidence led by the lessees about the quantity of stock stolen. 33 The issue in this appeal is whether the evidence of Mr O'Neill that his income was a package of approximately $84,000 or $85,000 would bring into play the principle that an applicant who fails to call precise evidence where such evidence is available, will fail to establish the evidentiary foundation permitting the assessment of damages. In our opinion it does not. The overriding principle is that while the amount of damage must be proved with certainty, this only means as much certainty as is reasonable in the circumstances: see Ratcliffe v Evans [1892] 2 QB 524 at 532-3. 34 We are satisfied that the Federal Magistrate erred in concluding that he was not in a position to assess damages and was wrong in declining to do so. Accordingly, the matter should be remitted to the Federal Magistrate for the purposes of assessing damage on the evidence led.

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Judgment (11 paragraphs)

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